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  • We are in the midst of an astonishing wealth transfer that would make the millennials the richest generation in human history.
  • Generation X and Y are the beneficiaries of the transfer, with the millennials receiving the largest share over the years.
  • Some families may have to choose the best asset protection tools to ensure they can pass much of their estate to their heirs, avoiding huge taxes and liabilities.

It is a well known fact that besides our own overseas territories, British high networth individuals also have a fondness for the American legal system and the protection it offers. The world is changing as we speak - and this article seeks to shed light on some little known facts about what is expected over the next 20 years and how some plan to deal with these changes.

How to Choose Between a Family LLC
How to Choose Between a Family LLC and a Trust Pixabay

About $84 trillion will be transferred as an inheritance to the next generation by 2045. This is according to the U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021: Evolving Wealth Demographics report. Much of the wealth will move from the Baby Boomer generation, though the silent generation will also pass on $15.8 trillion. The beneficiaries are generation X, who will receive more than the millennials in the next decade. Still, eventually, the millennial generation will receive the lion's share of the inheritance, and by 2045, they will be inheriting $2.5 trillion annually.

Over 45 million households will be bequeathing his wealth, meaning not just the ultra-high net worth individuals or high net worth individuals are involved. With such wealth moving across generations, the focus is on asset protection to ensure wealth is not lost on liabilities and taxes. Estate planning is a focus, and two tools are presently popular. These are Family LLCs and Trusts; determining which one will serve you best is the challenge. You can read more about what each option offers by looking at the blogs of these Wyoming legal experts or any viable equivalent.

When choosing between a family LLC and a trust, several factors must be considered to determine which option is best for your specific needs and goals. Here are some key considerations:

Asset protection

Both a family LLC and a trust can provide asset protection, but the level of protection may vary depending on your specific situation. If you are concerned about protecting your assets from creditors or lawsuits, a family LLC may be a better option, as it provides limited liability protection to the members. However, a trust can also provide some protection by keeping the assets out of your name.

Management and control

A family LLC allows family members to maintain control over the management of the assets held in the LLC, while a trust places control in the hands of the trustee. A family LLC may be a better option if you want to maintain control over the assets.

Taxes

Both a family LLC and a trust have different tax implications. A family LLC is typically a pass-through entity, where profits and losses flow through to the members' personal tax returns. A trust can provide tax benefits, such as reducing estate taxes and avoiding capital gains taxes on appreciated assets.

Privacy

If you value privacy, a trust may be a better option, as most trusts in many states do not require a public filing. It also helps you avoid the probate process, which is public. An LLC will still have certain records going on public record.

Cost and complexity

A family LLC may be more cost-effective and easier to set up and manage than a trust, which can be more complex and expensive. However, trusts tend to be cheaper to set up and maintain and, in the case of an irrevocable trust, do not require your general attention.

Estate planning goals

A trust is typically used for inheritance purposes, such as minimizing estate taxes and providing for the needs of beneficiaries. A trust may be the better option if your main goal is estate planning.

Conclusion: Making the choice

Family LLCs and Trusts are all excellent estate planning tools. They generally offer liability and tax benefits but at different levels. It also comes down to how they are designed and the states under which you create them. In the case of trusts, the level of protection you get also depends on the type of trust you set up.

Besides the liabilities and tax benefits, another consideration is the level of control you want to exercise on the assets. If you do not mind relinquishing day-to-day management of the assets and want total protection, then an irrevocable trust is an excellent choice. If you want to manage the assets, then an LLC gives you limited liability and allows you to control the business.

It comes down to your present circumstances and your estate goals. Experts also recommend that you consider getting professional help to best evaluate your needs and not just the right tool but also the best way to structure it to protect your interests and those of your heirs.